THE EVERYDAY PERSON’S GUIDE TO PUBLIC EDUCATION …

[Pages:20]THE EVERYDAY PERSON'S GUIDE TO PUBLIC EDUCATION

FUNDING

in Louisiana

FEDERAL

A Publication of ORLEANS PUBLIC EDUCATION NETWORK

The Orleans Public Education Network would like to extend a sincere thank you to the following organizations and individuals who provided critical insights and feedback in preparing this document.

Wilmer Cody Charles Hatfield

Bob Reily Debra Vaughan Orleans Parish School Board Recovery School District Louisiana Office of Planning and Budget Louisiana Department of Education

Researched and Written by Everett Henderson, Henderson Analytics Edited by Julia Ramsey and Deirdre Johnson Burel

Design & Layout by Eric Brown and Dione Morgan for Morganhill, LLC

Orleans Public Education Network 3321 Tulane Ave.

New Orleans, LA 70119 (P) 504.821.4004 (F) 504.821.4011



INDEX

Introduction

5

What Does the Louisiana

5

Constitution say About Public

Education?

Where Do Public Education

6

Funds Come From?

Local Funding

7

How are State Tax Dollars

9

Spent?

Overview of MFP

10

MFP Level 1 Funding

12

MFP Level 2 Funding

13

MFP Level 3 Funding

13

Conclusion

14

INTRODUCTION

The quality of K-12 education is of crucial importance to Louisiana's future. Our schools must be ready to meet the challenge of preparing the next generation of technological innovators, entrepreneurs, and community leaders. In the face of increasing international competition, it is imperative that we educate with this intention. Despite having the 3rd highest percentage of K-12 students enrolled in private schools in the nation (17.4%)1, more than four out of five Louisiana schoolchildren are educated in public schools. That means that even with the existence of private school options, the quality of K-12 public schools will still be the single largest factor determining whether or not the next generation of Louisianans is intellectually prepared to lead our great state into the future.

Although the level of funding is not the only factor determining the quality of education, it is useful to study education finance because it gives us an idea of the level of importance that voters attach to education. This brief will focus on the Minimum Foundation Program (MFP), Louisiana's primary method of funding its public elementary and secondary schools.

This brief was written to demystify the process of determining the level of state and local funding that a school district receives in a given year. OPEN's hope is that after reading this brief, readers will understand the context in which the MFP program is administered, the motivations behind each part of the MFP formula, and the mechanics of the formula.

WHAT DOES THE LOUISIANA CONSTITUTION SAY ABOUT PUBLIC EDUCATION?

The Louisiana constitution tasks the state legislature with establishing and providing for a public education system in Section I of Article VIII. In Section 13(B) of Article VIII, the Louisiana constitution gives the State Board of Elementary and Secondary Education (BESE) responsibility for annually developing and adopting "...a formula which shall be used to determine the cost of a minimum foundation program of education in all public elementary and secondary schools as well as to equitably allocate the funds to parish and city school systems." The constitution tasks the Louisiana legislature with annually setting aside funds "...sufficient to fully fund the current cost to the state of such a program as determined by applying the approved formula in order to ensure a minimum foundation of education in all public elementary and secondary schools."2 These sections of the state constitution establish the legislative basis for the Minimum Foundation Program (MFP).

12011 American Community Survey 3-Year Estimates. Table B14002: Sex by School Enrollment by

Level Of School by Type of School for the Population 3 Years and Over. US Census Bureau

5

2 Louisiana State Constitution

LOCAL

STATE

WHERE DO PUBLIC EDUCATION FUNDS COME FROM?

FEDERAL

6

During the 2010-2011 school year, the federal government, state government and local governments combined to invest nearly $8 billion in Louisiana's public school system. 42.5% of this total ($3.39 billion) came from state funding sources, 40.5% ($3.23 billion) came from local funding sources, and 17.1% ($1.36 billion) came from the federal government.3 Percentage breakdowns of federal, state, and local funding sources for recent fiscal years appear in the chart below:

It is clear that state and local funding sources make up the majority of school funding in Louisiana (81.6% to 86.0% during the 5 years), but it is also worth pointing out that Louisiana is generally significantly more dependent on federal funding sources than most states. During the period from the 2006-2007 school year to the 2009-2010 school years, the percentage of K-12 education funding that Louisiana got from federal sources ranged from being 1.5 to 2 times the national average.4

Looking back at 10 recent fiscal years, we see that Louisiana has typically been much more dependent on federal education funding than the nation as a whole. During the three school years from 2005-2006 to 2007-2008, Louisiana received more than twice the national average in federal education funds (relative to the overall size of the budget) primarily because of Katrina relief funding, however, even during the fiscal years leading up to Katrina, Louisiana still received at least 50% more federal education funding than the national average.5 This consistent pattern of exceeding the national average in federal funding (as a percentage of all education funding) is most likely due to the fact that Louisiana is one of the country's poorest states6 and a substantial proportion of federal education programs specifically target schools with large shares of low-income students for funding.7

The vast majority of education funding that Louisiana's school districts raise comes from sales and property taxes; during 2010-2011, only 1.3% of local education funding came from other sources.8 Overall, Louisiana's local school districts raised more than $1.3 billion in property taxes and over $1.5 billion dollars in sales taxes during 2010-2011. Orleans Parish raised about $95 million in sales taxes and nearly $111 million in property taxes during 2010-2011.9 In the absence of substantial increases in the amount of spending on taxable items and/or significant increases in the value of its taxable land, the main methods that school districts have to increase revenues are raising sales and/or property tax rates.

3Revenue by District - Federal, State and Local Tables, Louisiana Department of Education:



4US Department of Education, Common Core of Data:

5Ibid

62011 poverty figures released by the US Department of Agriculture's Economic Research Service indicated that Louisiana had the

nation's 4th highest child poverty rate, at 28.8%.

7For example, $13.7 billion of the US Department of Education's $43.6 billion FY 2013 budget (this $43.6 billion figure excludes Pell

Grant funding, which is for postsecondary education), or 31.4%, went towards Title I grants, which are given to school districts and

require these districts to prioritize the highest poverty schools.

82012-2013 Circular No. 1148 MFP Budget Letter, Louisiana Department of Education

7

9 2010-2011 Annual Financial Report:

LOCAL FUNDING

Property Taxes Explained

Property taxes have three components: market value, assessed value, and the tax rate. Local property tax assessors determine the fair market value of a piece of property in accordance with the legally established assessment criteria. Once the fair market value of a piece of property is established, the assessed value can be calculated. The assessed value of a piece of property is simply its fair market value multiplied by its assessment rate. Assessment rates in Louisiana are set by the state constitution and vary by property type. The assessment rate for land and improvements upon land for residential purposes (houses) is 10%.10 For example, a house with a fair market value of $100,000 would have an assessed value of $10,000 ($100,000 x 10%). This assessed value is then multiplied by a school district's property tax rate in order to determine the amount of taxes that are owed.

Property tax rates are commonly known as millage rates because the rates are usually set in mills. A mill is one-thousandth (0.001) of a dollar. For example, if the property tax rate in a school district were 5 mills, then a home with an assessed value of $10,000 would have a $50 tax bill ($10,000 x 0.005). Millage rates vary a great deal across school districts. In FY 2009-2010 the statewide average millage rate was 40.50 mills and ranged from a low of 8.71 mills (Terrebonne) to a high of 75.88 (Caddo). Orleans' millage rate in FY 2009-2010 was 41.26.11

10 Assessment rates for other types of property range from 15% to 25%. Property taxes on agricultural, horticultural, marsh and timber lands

8

are not levied according to their market values, but rather are levied according to their use value.

11 Minimum Foundation Program: 2011-2012 Handbook. Louisiana Department of Education

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